Employees must receive overtime pay at the rate of 1½ times their regular rate of pay for all hours worked over 40 in a workweek.

A common question we see is that “what is the regular rate of pay?”

First of all, the regular rate of pay can never be less than the minimum wage.  An employee’s regular rate is the amount that the employee is regularly paid for each hour of work.  When an employee is paid on a non-hourly basis, such as via salary or piece work, the regular hourly wage rate is found by dividing the total hours worked during the week into the employee’s total earnings.  The New York Department of Labor provides the following example:

For example, a non-residential employee who (before overtime) has piece rate earnings of $500 in a workweek for 50 hours work has a regular rate of $10 per hour.

Seem simple enough? Turning to the situation where an employee has multiple rates of pay…

The regular rate is the weighted average of the worker’s multiple rates of pay for the week based on the number of hours worked at each rate.  The weighted average is the total regular pay divided by the total hours worked in the week.  It is important to know that the overtime rate may vary weekly depending on how many hours the employee worked at each rate of pay.  The New York Department of Labor provides the following example:

For example, if an employee works 20 hours for an employer as a janitor for $10.00 per hour, and 30 hours for an employer as a groundskeeper for $20.00 per hour, that employee’s regular rate is $16.00 per hour.

To conclude this brief lesson in what constitutes regular rate of pay, employers should know that certain payments are not part of the regular rate.   These include true premiums paid for work on Saturdays, Sundays, and holidays, discretionary bonuses, pay for expenses incurred on the employer’s behalf, premium payments for overtime work, gifts, payments in the nature of gifts on special occasions, payments for occasional periods when no work is performed due to vacation, holidays, or illness.

While overtime administration seems fairly intuitive, employers run into situations where employees later claim they are owed overtime.  Thus, it is essential that employers have a real understanding of overtime implications.